Impala Platinum Holdings Limited - Joint announcement
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1957/001979/06)
Share code: IMP/IMPO
ISIN: ZAE000003554
("Implats" or "the Company")
Royal Bafokeng Resources Holdings (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/015191/07)
("RBR")
Joint announcement relating to a proposed black economic empowerment transaction
in respect of Implats and withdrawal of cautionary announcement
1. Introduction
Further to the Implats cautionary announcement dated 25 November 2005, Implats
and RBR ("the Parties") are pleased to announce that a Memorandum of
Understanding has been entered into between the Company and RBR, a wholly-owned
subsidiary of Royal Bafokeng Nation Development Trust, a trust of which the
Royal Bafokeng Nation and the members of the Royal Bafokeng Nation are
beneficiaries (collectively the "RBN"), regarding a proposed transaction which,
if implemented, will ultimately result in:
RBR having a fully diluted shareholding of approximately 9% in Implats; and
the creation of a R340 million trust to facilitate economic development of the
Bojanala Platinum District Municipality, situated in the north eastern corner of
the North West Province and including the towns of Rustenburg, Brits, Koster and
Moretele ("the greater Bojanala area" or "the greater Bojanala community") from
2006 to 2016 with a particular focus on the empowerment of the women in the
Bojanala area ("the RBR transaction").
As a separate and independent transaction, Implats will facilitate the
acquisition of a 3% fully diluted direct equity interest in Implats by a broad
base of staff employed by Implats" South African subsidiaries ("the ESOP
transaction").
Collectively, the RBR transaction and the ESOP transaction are defined as "the
Transactions".
Impala Platinum Limited ("Impala Platinum") is a wholly-owned subsidiary and
major operating entity of Implats. Implats is seeking to achieve effective black
economic empowerment ("BEE") of Impala Platinum through the Transactions for the
purposes of meeting the requirements of the Mining Charter.
2. Rationale
Implats has embraced the principles of transformation as a strategic imperative
to reinforce its position as a leading southern African mining company.
In order to fulfil the Mining Charter requirements, the RBN through RBR, has
been selected, through a rigorous process, as the anchor empowerment partner to
Implats and partner in Impala Platinum. The RBN recognises Implats as its
primary strategic relationship within the platinum industry. To further cement
the long-standing relationship between the Parties, RBR will have direct
management involvement in Impala Platinum focusing particularly on skills
transfer and employment equity and ultimately a direct ownership shareholding in
Implats. Implats will empower all of its other mining assets at the asset level,
a process that is well advanced.
The Transactions are distinguished by the following:
benefits accrue to truly broad based participants comprising 300,000 members of
the RBN, 26,962 historically disadvantaged persons ("HDPs") who are employees of
Implats and empowerment of the greater Bojanala community, in particular, women;
together with the Incwala Resources (Proprietary) Limited ("Incwala") credits
arising from the sale of Implats" interest in Lonplats (combined Eastern
Platinum Limited and Western Platinum Limited) ("the Incwala transaction"), will
result in Impala Platinum achieving in excess of the statutory requirements for
2014 (26% BEE ownership) in 2006; and
sustainability with a high degree of certainty of achieving the desired final
outcome of unencumbered sustainable BEE credentials which is enhanced by the
Transactions" structure.
The BEE model is based on a two-tiered structure:
a) An anchor empowerment partner, RBR, which will ultimately hold
approximately 9% of Implats (on a fully diluted basis, including the current 1
million Implats shares),through:
- an initial 49% undivided interest in the business and operations of Impala
Refining Services (Proprietary) Limited ("IRS"), the wholly-owned subsidiary of
Implats that houses the third party refining business of the Implats group of
companies, which ultimately converts into approximately 7.44% of Implats; and
management participation at the Impala Platinum level to comply with the Mining
Charter and Mining Scorecard requirements of skills transfer and meaningful
operational involvement.
b) An Employee Share Ownership Programme ("ESOP") with a 3% (fully diluted)
holding in the entire business of Implats incorporating both its South African
and foreign interests for all Patterson A, B and C grade employees of Implats"
South African subsidiaries through a trust. This is effectively a 5% indirect
shareholding in Impala Platinum and 25% of the Transactions.
It is envisaged that through a combination of empowerment of the RBN and its
greater community, particularly women, as well as Implats" own employees, the
Company will satisfy the requirements of a truly broad based initiative aimed at
real beneficial empowerment. This will not only enhance the lives of the
participants themselves (Implats employees and the communities in which the
Company operates) but will deliver benefits over a period of time which will
result in the sustainable upliftment of those participants and their dependents
and successors.
3. Overview of the participants
The RBN comprises a community of approximately 300,000 black, predominantly
rural South Africans. The demographic spread of the RBN"s members by gender,
age and other measures is representative of rural South Africa.
Please refer to the announcement which has been posted on the Company"s website
(www.implats.co.za) or to the announcement which will be published in the South
African press tomorrow for a diagrammatic representation of the RBN"s business
interests.
The RBN is a legal entity, led by their king Kgosi Leruo Molotlegi. It inhabits
and owns an area of land near Rustenburg in the North West Province of about
2,000 km2. This area is underlain by mineral resources comprising both Merensky
and UG platinum reefs forming part of the world"s second largest platinum
reserves.
The RBN holds various mineral and mining rights and investments mainly in
platinum group metals ("PGMs") and base metals. The RBN"s main source of income
is an annual royalty received from Impala Platinum for the right to mine the
RBN"s lease area. The royalty funds are channeled through the RBN to the Royal
Bafokeng Administration which provides for certain municipal, medical and
educational services for the Bafokeng community.
In keeping with the RBN"s 2020-vision to develop its people and become self-
sufficient by the second decade of the 21st century, the Kgotha kgothe (the
supreme tribal authority) of the RBN approved the corporatisation of its mining
assets under a new mining company, RBR.
Empowerment and participation in the RBR transaction by the greater Bojanala
community and, more particularly, the women of that area, will be achieved via
an Implats/RBN local economic development trust in an amount of R340 million
over a period from 2006 to 2016. Of this amount at least 50% (representing the
equivalent of R170 million) will be specifically under the control of women for
the benefit of the women of the greater Bojanala area. Women comprise 52% of the
RBN.
4. The RBR transaction
4.1 RBR transaction overview
In terms of the RBR transaction, which will be subject to the conditions
precedent as set out in paragraph 8 below, RBR will ultimately hold
approximately 9% of Implats" issued share capital on a fully diluted basis
through the following:
- a 1.35% direct holding (on a fully diluted basis) by the RBN in Implats
comprising 1 million ordinary shares currently owned by RBR; and
- a 49% undivided interest in an unincorporated joint venture ("UJV"),
comprising the business of IRS. This interest is convertible by RBR into shares
in Implats ("the Reserved Shares") equal to an approximate 7.44% equity stake in
Implats (on a fully diluted basis) within 10 years of RBR"s acquisition of its
interest in IRS. If RBR does not elect to convert that interest, Implats can, on
the expiry of the 10-year period, require RBR to convert that interest in IRS
into Implats shares. The ultimate aim is to facilitate a direct shareholding in
Implats, through the use of a UJV structure at an IRS operational level. This
has the effect of creating a sustainable operating cashflow for RBR since 49% of
the IRS net operational cashflows are stronger than the equivalent Implats
dividend flow.
The RBR transaction comprises the following indivisible and interconditional
transactions:
The acquisition
RBR will acquire a 49% undivided interest in the entire business undertaking of
IRS including its assets and liabilities, as a going concern, for a
consideration of R3,405 million to be settled in cash. IRS and RBR shall
simultaneously contribute their respective undivided interests in the business
of IRS to a UJV to be formed to operate the IRS business.
RBR is entitled to convert, failing which Implats shall have the entitlement to
require RBR to convert, by no later than the 10th anniversary of the purchase
date, its interest in IRS into a number of Implats shares ("the Conversion
Shares").
The number of Conversion Shares will be equal to the fair market value
(calculated on an agreed basis) of 49% of IRS at the time of conversion divided
by the historical 60-day volume weighted average price of an Implats share on
the date of conversion less a discount of 22.5%.
RBR shall also be entitled to subscribe for a further number of
Implats shares ("the Top-up Shares") so that the aggregate of the Conversion
Shares and the Top-up Shares (together referred to as "the Reserved Shares")
amounts to 5.501 million ordinary shares in Implats, equivalent to
approximately 7.44% of the enlarged share capital of Implats.
The subscription price for each Top-up Share shall be at a 25% discount to the
historical 60-day volume weighted average price of an Implats share on the date
of conversion.
"A" shares
Implats will issue 5.501 million "A" shares to RBR (equivalent to 7.44% of the
enlarged voting share capital of Implats) for a cash consideration of R5,501.
These shares will not be listed and will carry full voting rights but will only
be entitled to extraordinary distributions in excess of R3,405 million.
Extraordinary distributions are distributions that fall outside the dividend
cover policy approved by the Implats board and distributions made from funds not
generated from headline earnings.
At the date of conversion of RBR"s IRS interest into Implats ordinary shares
referred to in `The acquisition" above, Implats shall repurchase the "A" shares
for the original subscription price and cancel such shares.
4.2 Board representation
Following the RBR transaction, RBR shall have the right to:
- nominate one additional director to the Implats board, bringing the total
number of RBR nominees to two for so long as RBR holds no less than 90% of the 1
million shares in Implats that it currently holds and 90% of the Reserved Shares
or 90% of RBR"s IRS interest; and
- nominate three out of the ten Impala Platinum board members, at least one
of whom shall be a black woman and one of whom shall be nominated as the Deputy
Chairman of Impala Platinum.
4.3 Lock-in
RBR will not be entitled to dispose of the 49% interest in IRS or the Reserved
Shares until 31 May 2014 to ensure that empowerment credentials are retained for
at least the period required in terms of the Mining Charter and Mining Scorecard
unless the Department of Minerals and Energy ("DME") indicates in writing that a
disposal by RBR will not adversely affect Impala Platinum"s empowerment
credentials. In the event of a change of control of Implats, subject to certain
conditions, RBR will be entitled to convert its interest in IRS to shares in
Implats prior to the expiry of the lock-in period.
4.4 Protection of the rights of RBR
In order to afford RBR minority protection at the Impala Platinum level, while
recognising the principles of good corporate governance, Implats and RBR must
unanimously agree to the sale of the major part of the assets of Impala Platinum
and any action that requires a special resolution of the shareholders of Impala
Platinum. Furthermore, IRS will undertake not to dispose of the business of IRS,
other than as contemplated in the RBR transaction, and to carry on the existing
refining business substantially in the same manner as it is currently.
4.5 Local economic development
Both RBR and Implats will commit to jointly contributing a total of R340 million
in equal amounts commencing in 2006 until 2016 to a non-vesting local economic
development trust aimed at uplifting the greater Bojanala area around the mining
operations of Impala Platinum in annual amounts to be determined by the Parties.
At least 50% of the contributions made by the RBR and Implats shall be
controlled by women for distribution to initiatives focused primarily on the
advancement or empowerment of women in the greater Bojanala area.
5. The ESOP transaction
Implats intends to implement a 3% (R1,786 billion equivalent rand amount based
on the closing share price on 7 December 2005 of R871 per share) ESOP on a fully
diluted basis for all current Patterson A, B and C grade employees of Implats"
South African subsidiaries ("eligible employees") resulting in a 2.86% HDP
holding once non HDP qualifying persons are excluded from the calculation.
The salient features of the ESOP will be as follows:
- Implats will establish an ESOP trust and make a capital contribution of an
amount sufficient to fund the acquisition of 2.05 million Implats shares
The eligible employees are all the currently employed Patterson grades A, B and
C employees of Implats" South African subsidiaries;
- Ownership in the shares will be held by the ESOP trust. The eligible
employees will appoint the majority of the trustees of the ESOP trust who will
vote the shares on their behalf;
- The eligible employees will be capital beneficiaries and will be entitled
to any capital benefits after the 10-year vesting period has lapsed;
- On vesting, the ESOP trust will dispose of the shares and the net proceeds,
(after capital contribution repayments to Implats, ESOP trust costs and tax),
will be paid to the qualifying eligible employees;
- Implats will have the right of first refusal to buy the shares from the
ESOP trust on termination;
6. The resultant Company structure
Please refer to the announcement which has been posted on the Company"s website
(www.implats.co.za) or to the announcement which will be published in the South
African press tomorrow for a diagrammatic representation of the resultant group
structure.
7. Financial effects
The pro forma financial effects of the Transactions for the financial year ended
30 June 2005 are set out in the table below to assist Implats" shareholders to
assess the impact of the Transactions on Implats" basic earnings per share,
headline earnings per share, fully diluted earnings and headline earnings per
share, net asset value per share and tangible net asset value per share, based
on the audited results for the year ended 30 June 2005.
Due to the nature of these pro forma financial effects, they may not fairly
present Implats" financial position, changes in equity, results of operations or
cash flows. The directors of Implats are responsible for the preparation of the
pro forma financial effects.
Before the After the ESOP % change
Transactions transaction (2)
(1)
Basic EPS 7,920 7,785 -1.7%
(cents)
Diluted EPS 7,914 7,779 -1.7%
(cents)
Basic HEPS 4,325 4,190 -3.1%
(cents)
Diluted HEPS 4,322 4,187 -3.1%
(cents)
NAV (cents) 21,530 21,530 0.0%
Diluted NAV 21,530 21,530 0.0%
(cents)
NTAV (cents) 21,530 21,530 0.0%
Diluted NTAV 21,530 21,530 0.0%
(cents)
After the % change The %
RBR Transactions change
transaction (2 & 3)
(3)
Basic EPS (cents) 6,521 -17.7% 6,392 -19.3%
Diluted EPS 6,409 -19.0% 6,291 -20.5%
(cents)
Basic HEPS (cents) 2,926 -32.4% 2,798 -35.3%
Diluted HEPS 2,926 -32.3% 2,798 -35.3%
(cents)
NAV (cents) 23,461 9.0% 23,461 9.0%
Diluted NAV 21,591 0.3% 21,591 0.3%
(cents)
NTAV (cents) 23,461 9.0% 23,461 9.0%
Diluted NTAV 21,591 0.3% 21,591 0.3%
(cents)
Notes:
1. Extracted from the audited Implats financial statements for the year ended 30
June 2005.
2. Earnings and headline earnings per share after the ESOP transaction has been
determined assuming that the ESOP transaction was implemented on 1 July 2004, as
follows:
- an annual employee compensation charge amounting to R89.2 million, which is
based on recognised option pricing methodology using a strike price of R871 per
share, being the spot price on 7 December 2005.
Net asset and tangible net asset value per share after the ESOP transaction has
been determined assuming that the ESOP transaction was implemented on 30 June
2005.
3. Earnings and headline earnings per share after the RBR transaction has been
determined assuming that the RBR transaction was implemented on 1 July 2004, as
follows:
- interest earned at 7.4% on the cash received, amounting to R178.9 million
after tax;
- a "finance charge" of R293 million, being the unwinding of the discounted
liability, net of taxes (refer net asset impact below);
- a net charge of R0.7 billion comprising a "BEE compensation charge" of R1.5
billion and a deferred tax benefit of R0.8 billion. The calculation of the
discount on the RBR transaction is based on the 30-day volume weighted average
share price of Implats on 21 November 2005, being R774 per share (this charge is
based on the assumption that accounting guidance will require discounts on BEE
transactions to be expensed);
- an expense for the commitment to contribute up to R170 million over the
next 11 years to the greater Bojanala community amounting to a liability of R75
million;
- transaction costs of R40 million;
basic earnings and headline earnings per share was calculated using 66.129
million shares being the weighted average number of shares in issue during the
2005 financial year;
- diluted earnings per share was calculated by increasing earnings with the
finance charge of R293 million and by increasing the weighted average number of
shares with 5.676 million shares being the number of shares that RBR would be
entitled to if they converted their IRS interest on day one of the RBR
transaction; and
- diluted headline earnings per share was left unadjusted as the conversion
would have an anti- dilutive impact.
Net asset and tangible net asset value per share after the RBR transaction has
been determined assuming that the RBR transaction was implemented on 30 June
2005, as follows:
- R3.4 billion in additional cash received;
- a R2.8 billion liability, being the present value of the pre-tax IRS cash
flows payable to the RBR over the first 10 years;
- a R0.8 billion deferred tax asset on the above mentioned liability;
- a R0.7 billion net debit to retained earnings comprising a "BEE
compensation charge" of R1.5 billion and a deferred tax benefit of R0.8 billion.
- The calculation of the discount on the RBR transaction is based on the 30-
day volume weighted average share price of Implats on 21 November 2005, being
R774 per share (this charge is based on the assumption that accounting guidance
will require discounts on BEE transactions to be expensed);
- a R2.1 billion equity reserve, being the residual payment received for
future equity in Implats plus the equity settled share based "BEE compensation
charge";
- a R75 million "community development liability" relating to the commitment
with regards to the greater Bojanala community and a corresponding "community
development expense" to retained earnings;
- transaction costs of R40 million;
- net asset and net tangible asset value per share was calculated using
65.538 million shares in issue at 30 June 2005; and
- the shares used for net diluted asset and net diluted tangible asset value
per share was increased with 5.676 million shares being the number of shares
that RBR would be entitled to if they converted their IRS interest on day one of
the RBR transaction.
8. Conditions precedent
Implementation of the Transactions will be subject, inter alia, to:
- obtaining the required funding;
- signature of the requisite legal and funding agreements and fulfilment of
any conditions therein;
- obtaining the requisite regulatory approvals;
- the DME indicating in a manner reasonably acceptable to Implats that the
Transactions fully satisfy the requirements of the Minerals and Petroleum
Resources Development Act (the "MPRD Act"), the Mining Charter and the Mining
Scorecard or any other legislation, Codes or Guidelines that may become
applicable to the mining industry in South Africa such that Implats is in a
position to convert its old order rights to new order rights in terms of the
MPRD Act;
- the provision of a fair and reasonable opinion on the RBR transaction; and
- obtaining Implats shareholder approvals to the extent required.
9. Funding
RBR will raise the full purchase price for its interest in IRS from third party
funders. It is anticipated that there will be significant appetite from domestic
and international institutions to fund the RBR transaction.
10. Economic cost to Implats" shareholders
The economic cost to Implats" shareholders, calculated as a percentage of
Implats" market capitalisation, is in line with BEE transactions of a similar
size.
11. Mining Charter considerations
Implats believes that the RBR transaction, the ESOP transaction and the Incwala
transaction will together contribute in excess of 26% empowerment credits for
Impala Platinum based on gross platinum production in 2006, which will result in
full compliance with the ownership requirements of the Mining Charter at the
Impala Platinum level. This is calculated as follows:
- the 9% RBR transaction is equivalent to a 14.7% stake in Impala Platinum
comprising the 2.4% existing 1 million Implats shares and 12.3% in respect of
the RBR transaction.
- the 3% ESOP transaction of which 2.8% qualifies for empowerment credits (by
virtue of HDP participation) is equivalent to a 4.7% stake in Impala Platinum;.
- the sale of Implats" stake in Lonplats to HDPs led directly to the creation
of Incwala , which intends to become a leading resources company. Through
consultation with the DME, Implats estimates that when the credits gained as a
result of the Incwala transaction are attributed to Impala Platinum, this will
be equivalent to a 7.1% stake in Impala Platinum.
Implats believes that it is on target to meet the Mining Charter requirements
with respect to all the other pillars of the Mining Charter and the Mining
Scorecard including employment equity, procurement and skills development.
12. Withdrawal of cautionary
Shareholders of Implats are advised that the cautionary announcement dated 25
November 2005 is hereby withdrawn.
13. Circular
A circular setting out full details of the RBR transaction and the ESOP
transaction will be posted to shareholders once the requisite legal agreements
have been finalised and signed.
Johannesburg
14 December 2005
DETAILS OF TMEDIA AND ANALYST PRESENTATION AND WEBCAST
A presentation will be held at 12:00, today Wednesday 14 December 2005, to
discuss the proposed empowerment transaction at the Sandton Convention Centre,
Bill Gallagher Room (Maude Street, Sandton). Members of the financial community
are invited to attend the presentation in person or access it via a webcast at
www.implats.co.za.
Financial adviser and sponsor to Implats
Deutsche Securities (SA) (Pty) Ltd
Legal adviser to Implats
Deneys Reitz Inc
Reporting accountants and auditors to Implats
PricewaterhouseCoopers Inc
Financial adviser to RBR
Nedbank Capital
Legal adviser to RBR
Bell Dewar Hall
Joint structure adviser on the RBR transaction
TBOP
Transaction adviser to RBR on the RBR transaction
First Africa
Date: 14/12/2005 07:00:24 AM Produced by the JSE SENS Department
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